New Cold War with China? Not a Good Idea
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New Cold War with China? Not a Good Idea


WASHINGTON, DC – November 29, 2018

This weekend’s G-20 summit in Buenos Aires matters less for the main proceedings than for President Trump’s expected encounter with Chinese President Xi Jinping. Trump has lately seemed intent on escalating their quarrel over trade, and Xi has shown no sign of backing down. With neither side willing to compromise, the dispute runs the risk of causing a complete breakdown in U.S.-China relations, and poses the single biggest threat to global peace and stability.

Of course, China has given the hawks plenty of material. In recent weeks, it has, to be sure, blocked consensus and bullied delegates at the Asia-Pacific Economic Cooperation summit; harassed a U.S. Navy vessel on the open seas; arrested the Chinese president of Interpol and students agitating for workers’ rights; continued to shrink the space for open debate in Hong Kong; and, ignoring a global outcry, whitewashed the re-education camps in which a reported million Muslim Uighurs in western China may have been incarcerated.

This is not to mention the longer-term ways in which China appears to be threatening U.S. interests and the liberal international order.

Its mercantilist economic policies, including the forced transfer and outright theft of technology from foreign companies, have strained the global trading regime to breaking point. Its Belt and Road infrastructure push has added to a dangerous pileup of developing-country debt. It has bullied Taiwan, and defied United Nations rulings against island-building in the South China Sea. U.S. Vice President Mike Pence’s recent broadsides against China in Washington, D.C. and at the APEC summit in Papua New Guinea didn’t lack for specifics. 

Of course, this isn’t just about Trump. There is a consensus on China in Washington. A politics, trade-policy experts and longtime China-watchers see China as a grand strategic threat — one that needs to be confronted, much as the Soviet Union was confronted during the Cold War.

But we believe this new consensus is wrong.

Trump’s trade war will make Chinese leaders rethink China’s developmental strategies. China’s one-party system lacks a self-reflective mechanism in policy decision-making – as tragically highlighted in the 10-year cultural revolution. Trump might be one of the few to make Chinese leaders think twice. The war will definitely hurt China’s exports and overall economy in the short run. However, it might also encourage Chinese leaders to fix policy problems.

For example, China’s export-oriented economic model has become vulnerable from the trade war. To ensure its economic security, China needs to consider how to alter its export-dependent economic growth model. Moreover, the ZTE crisis has taught a hard lesson to the Chinese about the serious consequences of depending on U.S. technology in telecommunication industries. Chinese official media have started to reflect on the huge technological gap in various arenas between China and the United States after the ZTE crisis.

The rise of China’s state capitalism is one of the key tensions between China and the United States during Trump’s trade war. Relying on state capitalism is nothing new in Asia. The Japanese and South Korean governments used to do the same in the 1970s and ’80s to help their automobile industries. However, their experiences also showed that state capitalism could lead to a dead-end in economic growth because of its inherent problems, such as inefficient decision-making, lack of innovative incentives, and rampant corruption. Trump’s trade war will, at minimum, force Chinese leaders to rethink the weakest links in China’s economy as well as how to fix them before it’s too late.

Trump’s trade war will also encourage Chinese leaders to adjust possible strategic overreaching in foreign policy. It is normal for any rising power to seek its new “place in the sun.” However, when and how to pursue its “place” is always a tough decision. Japan and Germany failed to rise in the early 20th century partly because they adopted the wrong strategies at the wrong time. Although China has insisted its rise will be different from those of previous powers and peaceful in nature, people are paying more attention to what China does than to what it says.

Trump’s trade war will also offer China a strategic opportunity to consolidate its leadership in the Asia-Pacific. Trump has started tariff-oriented trade wars with all major partners, not only China. Although the U.S. has won his battle in North America by renegotiating a trade agreement with Canada and Mexico, Trump’s volatile policies have seriously damaged the international reputation of the U.S. in the long run.

The eroding soft power of the U.S. caused by Trump’s polices will offer China an opportunity to fill the leadership void. China has reconciled its bilateral relations with Japan, as seen from Prime Minister Shinzo Abe’s recent visit to Beijing in late October. China is also planning to seal a code of conduct on the South China Sea with Southeast Asian countries. A successful Asian diplomacy will be conducive to China’s defiance against Trump’s pressure on trade or other fronts.

We understand that it is not easy for any political leader to change existing policies. Even though leaders might be aware of their policy problems, they might not want to correct them because of legitimate concerns over political power domestically. Therefore, the above “favors” that Trump is doing for China may or may not be well received in Beijing. On the contrary, Chinese leaders might “hit back” by insisting on or even strengthening their original policies or plans to showcase their authority and legitimacy domestically. Any policy changes might be interpreted as compromise, failure, and even treason to foreigners, in view of the psychological impact from China’s hundred-year-humiliation history in the 19th century. Therefore, rather than continue its economic structural reform and political opening-up, China might head in the other direction, which would be catastrophic for China and the rest of the world.

Trump extended the trade war into the ideological realm between capitalism and socialism/communism in a speech to the UN. Vice-President Mike Pence has ranked China’s interference in American politics ahead of Russia’s. Although the U.S. and China will not directly engage militarily in a war because of the mutually assured destruction of nuclear weapons, some proxy wars and conflicts might be inevitable. Taiwan and the South China Sea may become the battlefields to test each other’s courage and resolve, unfortunately with blood.

Today Trump and his officials present a parody of self-confidence. What America and its friends need is less strutting and more conviction. The values that underpinned U.S. global leadership for decades aren’t out of date. There’s no cause for a strong and prosperous America to see China as a mortal threat — and every reason to avoid making it one. The meeting in Buenos Aires is a chance to mend this world-shaping relationship. Both leaders ought to seize it.

Author: USA Really